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Mexico reaches deal over controversial pipeline contracts

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Mexico’s government has announced it has successfully persuaded companies to waive ‘significant’ profits from natural gas pipeline deals signed under the previous administration. By renegotiating the controversial contracts, taxpayers are expected to save around $3.74 billion (€3.37 billion).

Mexico’s President Andrés Manuel Lopez-Obrador said Mexico’s federal government reached a deal on 26 August with Canadian pipeline operator TC Energy, a Mexican subsidiary of San Diego utility firm Sempra Energy and Mexican construction companies Grupo Carso and Fermaca. The deal effectively reduces what Mexico pays the firms to transport natural gas, meaning the companies had to sacrifice profits.

Lopez-Obrador had aimed to save $4.5 billion (€4.05 billion) as a result of the deal; however, the total saved is believed to be $3.74 billion (€3.37 billion). At a press conference, Lopez-Obrador said: “We’d like to thank the companies for reaching an agreement that advances both natural interests and business interests.”

The pipelines in question are not delivering gas as yet, however the clauses in the pipeline contracts allowed the companies to collect payments due to delays and ‘circumstances beyond their control’, which included issues to do with the weather, landowner disputes and arguments with indigenous groups, according to a report published on Energy Voice.

Mexico consumes more than 8 billion cubic feet of natural gas per day, but only produces 2.6 billion cubic feet per day, meaning the rest must be imported. Under the new agreement, Mexican officials expect 63% of natural gas from the seven pipeline projects to be used by government-owned power plants, with the remaining 37% consumed by industrial customers.

The first pipeline expected to come into service is the Sur de Texas-Tuxpan Pipeline. Most of its route is underwater through the Gulf of Mexico. It will be used to transport 2.6 billion cubic feet of natural gas every day from the Eagle Ford Shale of South Texas and the Agua Dulce Hub near Corpus Christi to the coastal state of Veracruz and on to the interior of Mexico.